Artificial Intelligence Techniques for Political Risk Management: An NLP Analysis of the 2019 US-China Trade War

Abstract

This chapter examines the use of artificial intelligence (AI) techniques in natural language processing (NLP) for risk management, with a particular focus on applications in the field of political economics. The aim of this analysis is to identify and measure potential political risks by conducting a textual analysis of newspapers and social media, using sentiment scores as proxies for nationalism. The study uses the 2019 US-China Trade War as a natural experiment to evaluate the impact of international disputes on political risks. One significant finding is the positive effect of the trade war on sentiment in China’s media about the US, which is attributed to the Chinese government’s efforts to mitigate the negative impact of the trade war on international relations. The study also reveals a negative impact on bilateral imports due to the conflict. Furthermore, the study employs a Difference-in-Difference (DID) model to investigate the impact of news censorship on media during the trade war. It is found that China’s regulators attempted to soften domestic anti-US sentiment, while the US media reported more negatively about China during the conflict. Overall, this analysis demonstrates how NLP technology can be effectively used to identify changes in the management of political risks by analysing news and other media.